NABORS DRILLING INTERNAITONAL LTD, MUMBAI V. DCIT (IT) 3(3)(1), MUMBAI

ITA 4896/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5570 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 13-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Assessee Lawyers: NEERAJ AGARWAL
• Keywords: Deemed to accrue or arise in india
• Section: 201; 44BB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 4896 /MUM/20 1 7 (ASSESSMENT YEAR 20 12 - 13 ) NABORS DRILLING INTERNATIONAL C/O. NANGIA & COMPANY UNIT NO. 1101, 11 TH FLOOR B WING, PENI NSULA BUSINESS PARK, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI - 400013. PAN NO. AADCN7265N VS. DCIT (IT) - 3(3)(1) ROOM NO. 1603 AIR INDIA BUILDING NARIMAN POINT MUMBAI - 400 021. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI NEERAJ AGARWAL DEPARTMENT BY SHRI MANJUNATHA SWAMY DATE OF HEARING 13 . 1 1 . 201 8 DATE OF PRONOUNCEMENT 13 . 1 1 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23.1.2017 PASSED BY THE LEARNED CIT(A) - 57, MUMBAI AND IT RELATES TO A.Y. 2012 - 13. IN THE GROUNDS O F APPEAL THE ASSESSEE IS CONTEST ING THAT MOBILIZATION REVENUE RECEIVED BY THE ASSESSEE IN RESPECT OF ACTIVITIES CARRIED OUT OUTSIDE INDIA IS NOT CHARGEABLE TO TAX. 2. AT THE TIME OF HEARING, LEARNED AR FAIR LY ADMITTED THAT THE IMPUGNED ISSUE HAS SINCE BEEN DECIDED AGAINST THE ASSESSEE BY HON'BLE SUPREME COURT, VIDE ITS ORDER DATED 30.10.2017 PASSED IN THE CASE OF SEDCO FOREX INTERNATIONAL INC. THROUGH ITS CONSTITUTED ATTORNEY MR. NAVIN SARDA VS. CIT (CIVIL A PPEAL NO. 4906 OF 2010 AND OTHERS). 3. WE HAVE HEARD LEARNED DR AND PERUSED THE RECORD. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW OPERATIVE PORTION OF THE ORDER PASSED BY HON'BLE SUPREME COURT IN THE ABOVE SAID CASE: - NABORS DRILLING INTERNATIONAL 2 48) FROM THE BARE READING OF THE CLAUSES, AMOUNT PAID UNDER THE AFORESAID CONTRACTS AS MOBILISATION FEE ON ACCOUNT OF PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH THE EXTRACTION ETC. OF MINERAL OIL IN INDIA AND AGAINST THE SUPPLY OF PLANT AND MACHINERY ON HIRE USED FOR SUCH EXT RACTION, CLAUSE (A) STANDS ATTRACTED. THUS, THIS PROVISION CONTAINED IN SECTION 44BB HAS TO BE READ IN CONJUNCTION WITH SECTIONS 5 AND 9 OF THE ACT AND SECTIONS 5 AND 9 OF THE ACT CANNOT BE READ IN ISOLATION. THE AFORESAID AMOUNT PAID TO THE ASSESS EES AS MOBILISATION FEE IS TREATED AS PROFITS AND GAINS OF BUSINESS AND, THEREFORE, IT WOULD BE INCOME AS PER SECTION 5 . THIS PROVISION ALSO TREATS THIS INCOME AS EARNED IN INDIA, FICTIONALLY, THEREBY SATISFYING THE TEST OF SECTION 9 OF THE ACT AS WELL. 49) THE TRIBUNAL HAS RIGHTLY COMMENTED THAT SECTION 44BB OF THE ACT IS A SPECIAL PROVISION FOR CO MPUTING PROFITS AND GAINS IN CONNECTION WITH THE BUSINESS OF EXPLORATION OF MINERAL OILS. ITS PURPOSE WAS EXPLAINED BY THE DEPARTMENT VIDE ITS CIRCULAR NO. 495 DATED SEPTEMBER 22, 1987, NAMELY, TO SIMPLIFY THE COMPUTATION OF TAXABLE INCOME AS NUMBER OF COM PLICATIONS WERE INVOLVED FOR THOSE ENGAGED IN THE BUSINESS OF PROVIDING SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL ETC. INSTEAD OF GOING INTO THE I N TEGRITIES OF SUCH COMPUTATION AS PER THE NORMAL PROVISIONS CONTAINED IN SECTIONS 28 TO 41 AND SECTIONS 43 AND 43A OF THE ACT, THE LEGISLATURE HAS SIMPLIFIED THE PROCEDURE BY PROVIDING THAT TAX SHALL BE PAID @10% OF THE AGGREGATE OF THE AMOUNTS SPECIFIED IN SUB - SECTION (2) AND THOS E AMOUNTS ARE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX.... IT IS A MATTER OF RECORD THAT WHEN INCOME IS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, RATE OF TAX PAYABLE ON THE SAID INCOME IS MUCH HIG HER. HOWEVER, THE LEGISLATURE PROVIDED A SIMPLE FORMULA, NAMELY, TREATING THE AMOUNTS PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) AND AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA AS MENTIONED IN SUB - SECTION (2) OF SECTION 44BB AS THE DEEMED PROFITS AND GAINS. THEREAFTER, ON SUCH DEEMED PROFITS AND GAINS (TREATING THE SAME AS INCOME), A CONCESSIONAL FLAT RATE OF 10% IS CHARGED TO TAX. IN THESE CIRCUMSTANCES, THE AO IS SUPPOSED TO APPLY THE PROVISIONS OF SECTION 44BB OF THE ACT, IN ORDER TO FIND OUT AS TO WHETHER A PARTICULAR AMOUNT IS DEEMED INCOME OR NOT. WHEN IT IS FOUND THAT THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA), OR AMOUNT RECEI VED OR DEEMED TO BE RECEIVED IN INDIA IS COVERED BY SUB - SECTION (2) OF SECTION 44BB OF THE ACT, BY FICTION CREATED UNDER SECTION 44BB OF THE ACT, IT B ECOMES INCOME UNDER SECTIONS 5 AND 9 OF THE ACT AS WELL. 50) IT IS STATED AT THE COST OF REPETITION THAT, IN THE INSTANT CASE, THE AMOUNT WHICH IS PA ID TO THE ASSESSEES IS TOWARDS MOBILISATION FEE. IT DOES NOT MENTION THAT THE SAME IS FOR REIMBURSEMENT OF EXPENSES. IN NABORS DRILLING INTERNATIONAL 3 FACT, IT IS A FIXED AMOUNT PAID WHICH MAY BE LESS OR MORE THAN THE EXPENSES INCURRED. INCURRING OF EXPENSES, THEREFORE, WOULD BE IMMATER IAL. IT IS ALSO TO BE BORNE IN MIND THAT THE CONTRACT IN QUESTION WAS INDIVISIBLE. HAVING REGARD TO THESE FACTS IN THE PRESENT CASE AS PER WHICH THE CASE OF THE ASSESSEES GET COVERED UNDER THE AFORESAID PROVISIONS, WE DO NOT FIND ANY MERIT IN ANY OF THE CO NTENTIONS RAISED BY THE ASSESSEES. THEREFORE, THE ULTIMATE CONCLUSION DRAWN BY THE AO, WHICH IS UPHELD BY ALL OTHER AUTHORITIES IS CORRECT, THOUGH SOME OF THE OBSERVATIONS OF THE HIGH COURT MAY NOT BE ENTIRELY CORRECT WHICH HAVE BEEN STRAIGHTENED BY US IN THE ABOVE DISCUSSION. FOR OUR AFORESAID REASONS, WE UPHOLD THE CONCLUSION. RESULTANTLY, ALL THE APPEALS OF THE ASSESSEES ARE DISMISSED. 4. SINCE THE ISSUE CONTESTED BY ASSESSEE HAS BEEN DECIDED AGAINST THE ASSESSEE BY HON'BLE SUPREME COURT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DI S MISSED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 13 . 1 1 .201 8 . SD/ - SD/ - (SANDEEP GOSAIN ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 13 / 1 1 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, M UMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI